8x8 falls 3.5% after beating Q3 estimates but issuing weak Q4 outlook
Cloud communications provider delivers 37% EPS beat but revenue forecast shows sequential decline, raising growth concerns
8x8 Inc. shares fell 3.5% in heavy trading on Tuesday after the cloud communications provider beat third-quarter expectations but issued weaker-than-anticipated guidance for the current quarter, raising fresh concerns about the company's growth trajectory.
The Campbell, California-based company reported fiscal third-quarter earnings per share of $0.12, surpassing analyst estimates of $0.0875 by 37.1%. Revenue reached $185.1 million, topping expectations of $179.7 million, according to data compiled from the company's financial release.
Despite the solid quarterly performance, investors focused on the company's forward outlook. 8x8 provided fourth-quarter revenue guidance of $181 million at the midpoint, representing a sequential decline from the $185.1 million reported in the third quarter. The company projected EPS of $0.075 at the midpoint for the current period, down from the $0.12 delivered in the December quarter.
"The market is clearly looking past the strong quarter and focusing on guidance that shows deceleration," said analysts covering the stock. "While Q3 was solid, the sequential decline in both revenue and EPS for Q4 suggests some near-term headwinds."
The company highlighted several operational achievements during the quarter, including its 20th consecutive quarter of positive operating cash flow. Since August 2022, 8x8 has reduced its debt burden by 41%, a metric that demonstrates the company's commitment to strengthening its balance sheet. 8x8 also raised its fiscal 2026 guidance, though the details were not immediately available in the earnings release.
8x8, which trades on the Nasdaq under the ticker EGHT, has been underperforming broader market indices over the past year. The stock has declined 39.4% over the last 52 weeks, significantly lagging the S&P 500's gains during the same period. As of Tuesday's close, shares were trading at $1.66, giving the company a market capitalization of approximately $230 million.
Analysts maintain a consensus "Buy" rating on the stock with an average one-year price target of $2.25, suggesting potential upside of roughly 35% from current levels, according to market data. However, the company faces notable challenges in the competitive unified communications-as-a-service (UCaaS) market, including pricing pressure and the shift toward lower-margin usage-based revenue models.
The company's performance in Q3延续了其beat earnings estimates in each of the trailing four quarters prior to the report, with an average surprise of 16.52%. In the previous quarter, 8x8 had beaten analyst expectations on both top and bottom lines, yet the stock still declined 4.3% following that announcement—a pattern that repeated with Tuesday's reaction.
8x8's core business provides integrated communication solutions including voice, video, chat, and contact center services for enterprises and government entities. The company has been emphasizing its platform-wide adoption of artificial intelligence and API-driven communications as growth drivers, though the fourth-quarter guidance suggests these initiatives may take time to translate into accelerated revenue growth.
With the stock trading at 0.32 times trailing sales and 14.24 times forward earnings, investors appear to be discounting the company's prospects amid concerns about sustained revenue growth in a crowded competitive landscape. The upcoming quarterly results will be critical in determining whether 8x8 can maintain its operational momentum while addressing the market's growth concerns.